More Bitcoin

Dave Killion — June 8, 2011

Over at Quora, someone asks “Is the cryptocurrency Bitcoin a good idea?” I find the answers have been very helpful for me in firming up my understanding of Bitcoins and their value. Surprisingly, I find many of the arguments posed against Bitcoin to be more relevant to centrally-directed fiat currencies like the dollar. For example, respondent Adam Cohen is concerned that because the algorithms that regulate Bitcoins limit the total amount that will be produced, deflation is inevitable. I think this is correct, but I much prefer Bitcoin deflation to fiat currency inflation, because it would encourage saving, which would encourage investment. To re-word Mr. Cohen –

Question: if your money is getting predictably more less valuable, why would you want to spend save it? Answer: marginally speaking, you wouldn’t.

At this point, although I think heavy investment in Bitcoins is potentially very risky, they provide advantages for certain transactions that make a small investment in them a good idea. And even better, the more people agree with me and elect to wade around in the shallows, the more secure our investments become. Also, because the ‘currency’ is deflationary, early investors will be rewarded for their initiative.

Image source

Comments

David C says

I love the orange bitcoin logo.

— June 8, 2011

Ms. Killion says

Yeah, well try to get your hands on bitcoins in Canada! (Trust me, it’s hard!) Oh well, they aren’t worth much now. That didn’t take long!

— June 28, 2011

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